ClimateWise welcomes the TCFD’s draft disclosure recommendations

28 February 2017 – ClimateWise also calls for closer alignment across both sides of insurers’ balance sheets.

ClimateWise, the global network of 29 insurance industry organisations has responded positively to the recent publication of the Recommendations Report of the Financial Stability Board (FSB) Task Force on Climate-Related Financial Disclosures (TCFD).

The TCFD was launched in 2016 and is chaired by Michael Bloomberg. It aims to develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders. It considers the physical, liability and transition risks associated with climate change and what constitutes effective financial disclosures across industries. In December 2016, the TCFD published its recommendations for consultation that included supplemental guidance for a number of sectors, including insurance.

As a global network of leading insurance industry organisations, ClimateWise works with its members to help close the climate-risk protection gap. We therefore welcome the TCFD’s draft recommendations and accompanying supplemental guidance for insurance companies.

For a decade, ClimateWise members have been publicly and voluntarily disclosing their strategic response to climate change across their core business activities. This forms the foundation of the ClimateWise network and we are pleased that the TCFD has identified the ClimateWise Principles as a relevant tool to help insurers implement many of the TCFD recommendations.

Maurice Tulloch, Chairman of ClimateWise and CEO International and Chairman, Global General Insurance at Aviva described the Task Force Recommendations as ”a game changer in helping to embed universal and consistent reporting requirements right across the financial services sector. The impact of introducing a systemic disclosure framework would play a significant role in supporting the required transition to the zero carbon, climate resilient economy of the future”.

Implementing the draft recommendations for insurance companies will be significantly easier if the following challenges are addressed:

Insurance companies are often exposed to both physical and transition risks on both the asset and liability sides of their balance sheets. However, greater attention has traditionally been paid to insurers’ exposure on the liability side of their business. The draft recommendations’ dominant focus on underwriting reinforces this, but there could be greater positive impact by reflecting the need to manage risk across both sides of the business. In this context, the TCFD’s conclusion, that more work is needed on asset classes like non-corporate bonds, is particularly relevant for the insurance sector, given its exposure to this asset class. However, any potential impacts on social justice must be acknowledged and carefully considered.

Insurance companies both underwrite the risks of, and invest in, other companies. Therefore, their ability to assess and disclose their own exposure to climate-related risks will always be, to some extent, dependent on the quality and consistency of disclosure by others. Actions to support consistent implementation of the TCFD’s recommendations by international organisations like the OECD, the International Accounting Standards Board (IASB), and the International Organisation for Security Commissions (IOSCO) will therefore be welcome. In this context, the insurance industry itself has data and analytic expertise that can support companies to assess and manage their exposure to physical risks.

It is important to develop common understandings of what is understood by short, medium and long-term timeframes across the insurance industry – for example, the differences between providers of life and non-life cover. Standardising definitions will enable insurers to work more closely with the risk modelling community and with high-quality climate data produced by public agencies. This will help them to assess the impact of different scenarios on business strategies throughout these varying timeframes.

For further information please contact:

Adele.Williams@cisl.cam.ac.uk | +44 (0)1223768451

About ClimateWise:

Established in 2007, ClimateWise is a growing global network of 29 leading insurers, reinsurers, brokers and industry service providers who share a commitment to reduce the impact of climate change on society and the insurance industry. ClimateWise is a voluntary initiative, driven directly by its members and facilitated by the University of Cambridge Institute for Sustainability Leadership (CISL), which brings business, government and academia together to identify solutions to critical sustainability challenges.

About the University of Cambridge Institute for Sustainability Leadership:

The University of Cambridge Institute for Sustainability Leadership (CISL) brings together business, government and academia to find solutions to critical sustainability challenges. CISL provides the secretariat to ClimateWise. Decisions of ClimateWise do not necessarily represent the policies or positions of CISL or of the wider University of Cambridge.

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